The document summarizes a presentation on taxation, work and gender equality in Ireland. It finds that Ireland's partial individualization of the income tax system in 2000 increased the employment rate of married women by 5-6 percentage points and their weekly work hours by 2 hours on average. It also reduced the weekly hours of unpaid childcare performed by married women with children by 3 hours. The policy achieved its goal of increasing incentives for spouses, especially women, to join the labor force. Further individualization may be considered but must account for distributional impacts and ways to address fixed costs of work.

1. Taxation, work and gender equality in
Ireland
Karina Doorley
NERI Labour Market Conference, 22nd May 2018

2. Introduction
 Removing barriers to work becoming an important policy objective
for most governments
 Population ageing, falling fertility & stagnating labour force
participation are threatening fiscal budgets across the EU (Dolls et
al, 2017)
 In Ireland, labour force participation rate of women is 64%
compared to 77% for men
 Increasing female labour force participation is one policy route to
increasing labour supply
 Can also increase well-being and GDP, tackle the gender wage and
pension gap, reduce female poverty and victimisation (OECD, 2012 ;
Bowlus & Seitz, 2006; Findlay & Wright, 1996)

3. Introduction
Barriers or disincentives to work can take two forms
 Low payoff to work
 In-work income vs. out-of-work income
 High fixed costs of going to work
 Childcare
 Commuting/relocating
 Care of elderly relatives
 The tax and welfare system can affect both but the focus of this
paper is the payoff to work

4. Introduction
 Joint taxation allows the primary earner in a couple to use the
allowances and bands of the lower or secondary earner
 increases the Marginal Effective Tax Rate (METR) of the secondary
earner (usually the woman)
 Large disincentive effects of joint taxation on hours of work of
married women in the US & 17 EU countries (Bick & Fuchs-
Schündeln , 2017) .
 The trend in recent decades in the EU has been a move towards
individual taxation.

5. Introduction
 Hypothetical switches from joint to individual taxation have been
evaluated for Ireland (Callan et al, 2009), France (Kabátek et al,
2014), Germany (Decoster and Haan, 2011) & Luxembourg
(Doorley, 2016)
 the participation rate of married women could increase by 1-9 ppt.
 The effect of actual policy changes has also been evaluated for the
UK (Roantree, 2018); the US (Lalumia, 2008), Sweden (Selin, 2014)
and Canada (Crossley and Jeon, 2007)
 similar findings.

6. This paper
 This paper estimates the effect of the partial individualisation of
the income tax system in 2000 on the labour supply of married
women
 Did the policy achieve its aim of increasing the labour supply of
spouses?
 The results of this will be useful in informing policy in the future
 Potential for any further extension of individualisation should also take
fixed cost of work into account
 Effects of individualisation on other important outcomes such as the
distribution of income left for future work

7. Background

8. Employment rate of 20-64 year olds
Source: Eurostat.
0
10
20
30
40
50
60
70
80
90
1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016
EU 15 men
Ireland men
UK men
EU 15 women
Ireland women
UK women

9. Barriers to secondary work in Ireland
 Historical context (Russell et al, 2017)
 Marriage bar of 1932, repealed in 1973
 Marriage bar in UK lifted in 1944, female employment encouraged in
the context of WWII
 EU driven equality legislation (Anti-Discrimination Pay Act 1974 and
Employment Equality Act 1998)
 Participation Tax Rate (PTR) and Marginal Effective Tax Rate (METR)
of secondary earners high by European standards, particularly for
women with children (Rastrigina & Verashchagina, 2015)

10. Partial individualisation of income tax
2000-2002
 1980-1999: system of income splitting, whereby married couples
could reduce their tax bill compared to cohabiting couples by
sharing allowances and rate bands between partners
 December 1999: Minister for Finance announced the “radical
change of moving to individualisation of the standard rate band
over this and the next two Budgets.”
 Considerable opposition to this reform which was thought to penalise
women who chose to stay at home
 Partial reform occurred and this “hybrid” system is still in place

11. METR of secondary earner
Figure 1 Marginal effective tax rate of secondary earner in a simplified tax-benefit system in Ireland
in 1999; in a counterfactual 1999 system with partial individualisation of the standard rate band and in
2000. Primary earner works 40 hours per week and earns the year-specific median male hourly wage.
Secondary earner works 0-40 hours per week and earns the year-specific median female hourly wage.
0
0.05
0.1
0.15
0.2
0.25
0.3
0.35
0.4
0.45
0.5
0 5 10 15 20 25 30 35 40 45
MarginalEffectiveTaxRate
Hours of work
1999
1999 + ind. reform
2000

12. Data and Method

13. Data
 Living in Ireland survey data 1995-2001 (European Community
Household Panel)
 5 years of pre-reform data and two years of post-reform data
 Sample of 20-60 year olds.
 Outcomes of interest
 Employment
 Hours of work
 Hours of unpaid childcare

14. Method
 Difference-in-Differences framework compares change in outcomes
for those affected by the reform (treatment group) to change in
outcomes for those unaffected by reform (control group)
𝑌𝑌𝑖𝑖𝑖𝑖
= β1 + β2 𝑇𝑇𝑇𝑇𝑇𝑇𝑇𝑇𝑇𝑇𝑖𝑖 + β3 𝑃𝑃𝑃𝑃𝑃𝑃𝑃𝑃𝑡𝑡
+ β4(𝑇𝑇𝑇𝑇𝑇𝑇𝑇𝑇𝑇𝑇 ∗ 𝑃𝑃𝑃𝑃𝑃𝑃𝑃𝑃)𝑖𝑖𝑖𝑖+ δ𝑋𝑋𝑖𝑖 + γ𝑇𝑇𝑡𝑡 + ε

15. Method
 Treatment group is married women
 Most secondary earners are women
 Control group is
 single women (unaffected by policy change) or
 married men (affected by policy change but unlikely to respond)
 Alternative treatment (secondary earners) and control group
(primary earners) doesn’t change conclusions
 Assumptions
 Pre-treatment trends are similar for treatment and control group
 No other policy change which affects treatment and control group
differentially

16. Pre-treatment trends
.4.5.6.7.8.9
employed
1994 1996 1998 2000 2002
year
Married men Single women
Married women
employed
10203040
hours
1994 1996 1998 2000 2002
year
Married men Single women
Married women
hours
020406080
childcare_hours
1994 1996 1998 2000 2002
year
Married men Single women
Married women
childcare_hours
Figure: The evolution of employment, hours of work and hours of unpaid childcare (LII data)

17. Difference-in-Differences results:
employment and hours of work
Employment
Treatment effect 0.04 0.07 *** 0.06 *** 0.07 *** 0.06 *** 0.06 ***
(0.03) (0.03) (0.03) (0.02) (0.02) (0.02)
Controls No Yes Yes No Yes Yes
Time trend No No Yes No No Yes
R squared 0.025 0.1853 0.1886 0.1537 0.2563 0.2591
N 17,448 17,448 17,448 22,231 22,231 22,231
Hours of work
Treatment effect 1.26 2.11 ** 2.07 ** 1.79 ** 1.77 ** 1.77 **
(1.07) (0.96) (0.96) (0.79) (0.76) (0.76)
Controls No Yes Yes No Yes Yes
Time trend No No Yes No No Yes
R squared 0.0475 0.2234 0.2247 0.2932 0.3568 0.3581
N 17,448 17,448 17,448 22,231 22,231 22,231
Control group = single women. Control group = married men
Sample is aged between 20-60. The treatment effect is equivalent to β? in equation 1. Marital status is self-
defined. Extra controls include age, age squared, post-secondary qualification, no. of children, any children
under 12 and predicted wage. The time trend is a series of year dummies.

18. Difference-in-Differences results:
childcare hours
(1) (2) (3)
Hours of childcare
Treatment effect -3.11 -3.23 * -3.24 *
(1.98) (1.87) (1.87)
Controls No Yes Yes
Time trend No No Yes
R squared 0.3578 0.4285 0.4288
N 15,122 15,122 15,122
Treatment group = married women with children. Control group =
married men with children.
Sample is aged between 20-60. The treatment effect is equivalent to β? in equation
1. Marital status is self-defined. Extra controls include age, age squared, post-
secondary qualification, no. of children, any children under 12 and predicted
wage. The time trend is a series of year dummies.

19. Sensitivity analysis

20. Other policy changes
 Changes in tax rates & allowances
 Very small effects on METR and PTR
 Expansion of Family Income Supplement in 2000
 No effect on labour supply of married men or women (Bargain &
Doorley, 2011)
 Introduction of National Minimum Wage of £4.40 per hour
 Negligible employment effects (O’Neill et al, 2006)
 Restrict sample to those with predicted wages well above the NMW (>
£5.50) – no change to conclusions

21. Conclusion

22. Summary
 The partial individualisation of the income tax system in 2000
increased the employment rate of married women by 5-6
percentage points and the weekly hours of work by 2 per week.
 Comparable to Callan et al (2009) for Ireland; Crossley & Jeon (2007)
for Canada and Selin (2014) for Sweden
 It also reduced the number of hours of unpaid childcare being
performed by married women with children (by 3 per week)
 Effective at reaching its aim
 to increase the incentives for spouses to join the labour force

23. Future policy directions
 Potential for any further individualisation of the taxation system
needs to consider
 Implications for income distribution
 Cost
 Paths to revenue neutrality
 Addressing fixed costs of work as a complementary reform likely to
be necessary
 Child & elderly care
 Commuting/housing costs
 etc

24. Thanks!
Questions?
karina.doorley@esri.ie

25. Appendix

26. Selected labour market statistics
IE UK EU
Average weekly hours of work 32 32 34
Unadjusted gender pay gap 14 21 17
Adjusted gender pay gap 17 12 -
Marginal Effective Tax Rate (METR) of
secondary earners with young children 43 33 33
Female/male income ratio of elderly 0.84 0.84 0.84
Labour supply elasticities of married women 0.40 0.11 0.27
METR for 2012 taken from Rastrigina & Verashchagina (2015). Labour supply
elasticities for 1998-2005 period from (Bargain et al, 2013). All other statistics for 2016
from Eurostat.

27. Summary statistics
Women Men
Women Before After Difference Before After Difference
Employed 0.50 0.58 0.08 *** 0.65 0.66 0.01
Weekly hours of work (incl. zeros) 16.17 18.49 2.32 *** 29.11 29.06 -0.05
Weekly hours of childcare (incl. zeros) 35.18 30.72 -4.46 *** 3.74 3.72 -0.02
Part-time employment 0.18 0.21 0.03 *** 0.05 0.04 -0.01 ***
Full-time employment 0.33 0.37 0.04 *** 0.60 0.62 0.02 ***
Age 38.66 39.71 1.05 *** 36.62 37.52 0.9 ***
Post-secondary qualification 0.32 0.35 0.03 *** 0.26 0.28 0.02 ***
No. of children 1.21 1.04 -0.17 *** 1.03 0.87 -0.16 ***
Children under 12 (0/1) 0.43 0.39 -0.04 *** 0.35 0.31 -0.04 ***
Hourly wage of workers 7.61 8.58 0.97 *** 9.26 10.49 1.23 ***
Predicted hourly wage for all 7.13 8.17 1.04 *** 9.07 10.35 1.28 ***
Married 0.68 0.67 -0.01 0.60 0.60 0
Primary earner (married individuals) 0.04 0.03 -0.01 *** 0.73 0.73 0
Secondary earner (married individuals) 0.69 0.67 -0.02 *** 0.03 0.03 0
Observations 13009 5424 15385 6324
Sample is aged 20-60 and statistics are weighted using individual weights. The before period is years 1995-1999. The After period is years
2000-2001. Statistical significance is indicated by * p<0.1 ** p<0.05 *** p<0.01"

28. Alternative treatment & control
groups.4.5.6.7.8.9
employed
1994 1996 1998 2000 2002
year
Secondary Primary
employed
10203040
hours
1994 1996 1998 2000 2002
year
Secondary Primary
hours
1020304050
childcare_hours
1994 1996 1998 2000 2002
year
Secondary Primary
childcare_hours

29. Alternative treatment & control
groups
(1) (2) (3)
Employment
Treatment effect 0.06 *** 0.06 *** 0.06 ***
(0.02) (0.02) (0.02)
Controls No Yes Yes
Time trend No No Yes
R squared 0.1575 0.2663 0.2689
N 15,484 15,484 15,484
Hours of work
Treatment effect 1.91 * 2.02 ** 2.02 **
(1.01) (0.94) (0.94)
Controls No Yes Yes
Time trend No No Yes
R squared 0.2777 0.3616 0.3625
N 15,484 15,484 15,484
Childcare hours
Treatment effect -4.00 ** -4.04 ** -4.05 **
(2.03) (1.72) (1.72)
Controls No Yes Yes
Time trend No No Yes
R squared 0.214 0.4244 0.4249
N 15,484 15,484 15,484
Treatment group = secondary earners. Control group = primary earners.
Sample is aged between 20-60. The treatment effect is equivalent to β? in equation 1. Marital status
is self-defined. Extra controls include age, age2 squared, post-secondary qualification, no. of
children, any children under 12 and predicted wage. The time trend is a series of year dummies.

30. Partial individualisation of income tax
2000-2002
1999 2000 2001 2002
Standard tax rate 24% 22% 20% 20%
Top tax rate 46% 44% 42% 42%
Standard rate band for singles 17,800 21,600 25,395 28,000
Standard rate band for one earner couples 35,600 35,600 36,822 37,000
Standard rate band for two earner couples 35,600 43,200 50,790 56,000
Personal tax credit (standard rate) -transferable 1,280 1,313 1,397 1,520
Employee tax credit (standard rate) - non-transferable 305 279 508 660
Source: www.revenue.ie. Monetary values in €
100%
transferability of
standard rate
band
32%
transferability
of standard
rate band

31. PTR of secondary earner
Figure 2 Participation tax rate of secondary earner in a simplified tax-benefit system in Ireland in
1999; in a counterfactual 1999 system with partial individualisation of the standard rate band and in
2000. Primary earner works 40 hours per week and earns the year-specific median male hourly wage.
Secondary earner works 0-40 hours per week and earns the year-specific median female hourly wage.
0
0.05
0.1
0.15
0.2
0.25
0.3
0.35
0 10 20 30 40 50
ParticipationTaxRate
Hours of work
1999
1999 + ind. reform
2000

32. DiD results for those above NMW
Employment
Treatment effect 0.08 ** 0.06 ** 0.06 * 0.04 ** 0.05 *** 0.05 ***
(0.03) (0.03) (0.03) (0.02) (0.02) (0.02)
Controls No Yes Yes No Yes Yes
Time trend No No Yes No No Yes
R squared 0.04 0.18 0.18 0.14 0.23 0.24
N 13497 13497 13497 20793 20793 20793
Hours of work
Treatment effect 2.88 ** 2.29 ** 2.18 * 1.06 1.46 * 1.48 **
(1.25) (1.16) (1.16) (0.81) (0.77) (0.77)
Controls No Yes Yes No Yes Yes
Time trend No No Yes No No Yes
R squared 0.08 0.23 0.23 0.28 0.34 0.34
N 13497 13497 13497 20793 20793 20793
Hours of childcare
Treatment effect -2.58 -3.26 * -3.28 *
(2.02) (1.91) (1.91)
Controls No Yes Yes
Time trend No No Yes
R squared 0.36 0.43 0.43
N 14274 14274 14274
Control group = single women. Control group = married men
Sample is aged between 20-60 with a predicted hourly wage in excess of £5.50 in 2000 prices. The treatment effect is
equivalent to β? in equation 1. Marital status is self-defined. Extra controls include age, age squared, post-secondary
qualification, no. of children, any children under 12 and predicted wage. The time trend is a series of year dummies. The
treatment group for the childcare hours model is married women with children and the control group is married men
with children